Review lopsided terms or face protest: FHRAI warns Zomato, Swiggy

Aug 20, 2019 by The Passage Team

The Federation of Hotel & Restaurant Associations of India (FHRAI) has called for a review of the discount-driven schemes and other unethical business practices in a letter to the Food Service Aggregators (FSA) such as Zomato, Swiggy, Nearbuy, Dineout, EasyDiner and Magicpin.

“The most common complaint with the FSAs is about the contracts being one sided. These contracts aren’t even consistent across the industry and almost always unfair towards start-ups as against established brands. A model contract which is mutually agreed upon has to be accepted. As such a conduct is indicative of dominant behaviour and is indeed exploitative.
Further, the agreement terms are not sacrosanct as they are frequently and unilaterally changed from time to time and always in favour of the FSAs
We are absolutely in favour of doing business, a business that is a win-win for everyone involved,” said Gurbaxish Singh Kohli, vice president, FHRAI.

FHRAI has stressed on the unreasonably high commissions, payment terms and hidden charges by the FSAs.

“Penal commissions of 25% are now standard. Such high charges merely for offering a platform are unjustified. Commissions are not standard and customised to exploit the startups which are indicative of an exploitative and dominant behaviour. Payment terms are not adhered to and are easily violated for the slightest excuse without recourse to any easy dispute resolution.

It has also been brought to our notice that GST is being charged on the commission, high commissions are being extracted from merchant establishments under the pretext that it is for both discovery and sales promotion," said Somaraju, honorary treasurer, FHRAI

FHRAI has also accused FSAs of masking their customers.

“It is the restaurant’s prerogative to know who its customer is and we insist on the FSAs to share the database. More recently the FSAs have tried to use new technology like free Wi-Fi without disclosing the real intent of surreptitiously collating customer data for their own use.

Food tech companies and aggregators do not and cannot represent the F&B industry and as such cannot choke the entrepreneurial aspirations and enterprise of our members by unsuspecting maverick startup founders to enterhe Industry and then stifle them to a point where they have very little choice but to shut shop or slowly bleed to death.

The FSAs methods and practices are unbearable and require to be dealt with in the larger interest of the hotel and restaurant Industry,” Kohli added.

The Passage Team

The Passage is committed to creating in-depth content over technology industry across Asia with a focus on emerging startups in the technology, healthcare, education, food, tech, travel & mobility segments.